Fixed labour costs could be NBN saviour

Chief executive of the National Broadband Network Company (NBN Co) Mike Quigley has said he may seek to get fixed labour costs for the build of the network, in order to prevent its cost exceeding the amount forecast by the government.

Chief executive of the National Broadband Network Company (NBN Co) Mike Quigley has said he may seek to get fixed labour costs for the build of the network, in order to prevent its cost exceeding the amount forecast by the government.

Speaking on ABC1's 7:30 last night, Quigley said that to prevent labour costs from getting more expensive as the project rolls on over the next nine years, as the skills-shortage continues, the company may go down a fixed-cost path.

"We may look at how to get a commitment for some level of fixed costs," he said. "Labour costs are hard to predict, frankly. That's the one area which is most difficult to predict, and clearly the events that took place this year in Queensland with the cyclones and the floods and the amount of rebuilding that needs to happen is going to have an impact."

Quigley said that he wouldn't allow the costs to blow out.

"What we will be doing is balancing those as the project progresses. But what I can say is we clearly, as a company, will not just continue to build if we see costs increase," he said.

The executive told 7:30 that because the roll-out of the NBN is being done in stages, such as the First Release sites in Tasmania and on the mainland, the company will be able to track the costs and adjust things if it looks like the project is going over-budget.

"This is not one big bang one-off project. It's not like building a Sydney Harbour Bridge or a desalination plant or a hydroelectric scheme," he said. "We are repeating over and over and over again the same modules, which means it's not a big surprise at the end. We will be able to track costs as we go."

Last month, NBN Co stepped away from tender discussions with 14 construction companies over the construction of the network, citing that the prices the companies were offering were far in excess of what NBN Co was willing to pay. Quigley refused last night to go into detail over the actual prices that the companies were offering, but indicated that the company would be able find a single construction partner for the project.

"From the inquiries I have made, it's not unusual that you end up in a situation when you have a big public infrastructure activity such as this. I'm confident we will end up with a successful partner for building the network," he said, also denying suggestions that the business case had attempted to shift the risks of the construction onto the builders.

"We had a set of assumptions in our business case which we thought were perfectly reasonable and I'm still confident that we're gonna end up in the place where we need to be to get this network."

Quigley said that NBN Co has signed close to 80 tenders so far, and now that the company is moving into the larger tenders involved in the project, NBN Co is trying to ensure that the company gets value for money.

"We have not finished this process yet. And as I have said repeatedly, we are looking after the taxpayers' funds. It would be very easy for me by the way just to sign up a number of companies at costs above where I think they should be. I won't do that."